Far More Money Pulled out of Bonds Flows into Cash Than into Equities

There is a “rotation” underway in the investment world but would we call it “great?” Read this investor insight by TrimTabs Asset Management to learn more about the recent fund flows and what other activity indicates at the close of July.

Investors Pull Record $87.8 Billion out of Bond Funds in June and July, Breaking String of 21 Consecutive Monthly Inflows. Far More Money Pulled out of Bonds Flows into Cash Than into Equities.

Fund investors abruptly ended their long-standing love affair with bonds this summer. Since the start of June, bond mutual funds and exchange-traded funds have redeemed $83.2 billion. This outflow is equal to 2.2% of these funds’ assets and is by far the largest two-month outflow on record.

Source: TrimTabs Investment ResearchPast performance is not indicative of future results.The outflow of $68.0 billion in June was the biggest on record, while the outflow of $19.8 billion in July has been the fourth-biggest on record. Moreover, these outflows interrupted a string of 21 consecutive months of inflowsSource: TrimTabs Investment ResearchPast performance is not indicative of future results.

The latest data suggest far more of the money that has come out of bonds this summer has been stashed under the mattress than has flowed into equities. In the latest seven weeks ended in the week ended July 15, $123.6 billion poured into savings deposits, while $34.4 billion flowed into retail money market funds. The combined inflow of $158.8 billion is three times the $53.5 billion that flowed into all equity MFs and ETFs in June and July.

Flows in Seven Weeks Ended July 15

There is definitely a “rotation” underway in the investment world, but it is premature to call it “great,” and the “rotation” is funneling far more money into cash than equities. Given the lofty valuation of the U.S. stock market, we cannot blame investors—particularly those with a long-term outlook—for favoring cash over stock.

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